Alright, let's go through this step-by-step to prepare a Personal Statement of Financial Position.
### Step a: Get a 4-piece of paper
This is a simple instruction asking you to prepare yourself with four pieces of paper for the exercise.
### Step b: Write your current savings and the value of everything that you own
On the first piece of paper, you need to write down:
- Current Savings: This represents the money you have set aside in your bank account or in other liquid forms. For this example, let's say your current savings are [tex]$5000.
- Value of Everything You Own: This includes all the assets you possess like your house, car, gadgets, etc. For this example, the total value is $[/tex]15000.
Summary for Step b:
```
Current Savings: [tex]$5000
Value of Everything You Own: $[/tex]15000
```
### Step c: Write the amount that you owe from your friends, family members, parents (tuition)
On the second piece of paper, list all your debts or liabilities. This includes money you owe to friends, family, or other debts like loans for tuition.
- Amount Owed: For this example, the total amount you owe is [tex]$3000.
Summary for Step c:
```
Amount Owed: $[/tex]3000
```
### Step d: Deduct the amount that you owe from the amount you own
Now, on the third piece of paper, calculate your net worth by deducting the total amount you owe (from step c) from the total value of everything you own (from step b).
Formula:
```
Net Worth = Value of Everything You Own - Amount Owed
```
Using the given values:
```
Net Worth = [tex]$15000 (Value of Everything You Own) - $[/tex]3000 (Amount Owed) = [tex]$12000
```
Summary for Step d:
```
Net Worth: $[/tex]12000
```
### Step e: Associate amounts owned with assets and amount owed with the net amount as equity
On the fourth piece of paper, bring together all these components to form your Personal Statement of Financial Position. Break down into assets, liabilities, and equity:
- Assets: This includes your current savings and the value of everything you own.
- Liabilities: This is the amount you owe.
- Equity: This is your net worth.
Final Summary:
```
Assets:
- Current Savings: [tex]$5000
- Value of Everything You Own: $[/tex]15000
Liabilities:
- Amount Owed: [tex]$3000
Equity (Net Worth):
- $[/tex]12000
```
Your final Personal Statement of Financial Position would look like this:
```
--------------------------
Personal Statement of Financial Position
--------------------------
Assets:
- Current Savings: [tex]$5000
- Value of Everything You Own: $[/tex]15000
Total Assets: [tex]$15000
--------------------------
Liabilities:
- Amount Owed: $[/tex]3000
Total Liabilities: [tex]$3000
--------------------------
Equity (Net Worth):
- Total Assets - Total Liabilities = $[/tex]12000
--------------------------
```
This structured format helps you to clearly understand your financial position by organizing your assets, liabilities, and equity.
